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3Com Corp., the company that gave birth to Ethernet, has agreed to be acquired by Hewlett Packard Co. for a total of approximately $2.7 billion in cash, in a deal that already has approval from the boards of both companies.
Buying Marlborough-based 3Com gives HP a well-developed roster of Ethernet switching products, a much stronger corporate presence in China, and a leap into network security products through 3Com’s subsidiary, TippingPoint, which the company acquired for $400 million in 2005.
HP also gets access to 3Com’s large research and development team in China, which came about from 3Com’s partnership with Huawei Technologies Co. Ltd. Officials at Calif.-based HP say that the purchase will allow it to boost its next-generation data center strategy built on the convergence of servers, storage, networking, management, facilities and services.
“We very much value the engineering capabilities from this company,” said Dave Donatelli, executive vice president and general manager of enterprise servers and networking for HP, in a conference call.
The agreement calls for 3Com stockholders to receive $7.90 for each share of 3Com common stock that they hold at the closing of the merger, which is expected to happen in the first half of calendar 2010. HP officials declined to comment on how the company would integrate the brand of 3Com into its own branding until after the close of the deal.
3Com, which has 5,800 employees globally, posted revenue of $290.5 million and $7.5 million in net profit in the third quarter, a year-over-year drop of 15 percent and 91 percent respectively. It held $200 million in long-term debt, including $46 million due this fiscal year and another $46 million due in its 2011 fiscal year. The company has a market cap of $2.23 billion.
“I’ve been looking forward to this moment and am looking forward to building some scale and taking on the other guys,” said Ron Sege, president and COO of 3Com during a conference call. Marius Haas, senior vice president and general manager, HP ProCurve Networking, agreed with Sege and put the competition with Cisco Systems Inc. more bluntly.
“We are the clear no. 2 in the networking space,” Haas said.
While he could not talk about any specific plans about the future of the Marlborough facility until after the deal closes, Sege said in an interview that HP was buying not only the products of 3Com but the networking expertise that comes with its employees.
“We’ve got our North American sales organization based there, we do technical support, customer support and these are all areas that will be very important to the combined company, and are areas that HP has indicated that they will continue to invest in going forward,” he said. “We will remain in the New England area most likely.”
Sege also wouldn’t comment on his own future after the deal closes, except to say that “The top executives at 3Com are obviously 100 percent committed to the combination, and we are going to do what it takes to make it successful.”
This is the second technology acquisition for HP in Massachusetts in a little over a year. In August of 2008, HP bought Waltham wireless networking equipment maker Colubris Networks Inc. for an undisclosed amount to add the company’s wireless local area networking equipment to its ProCurve product line. HP subsequently integrated Colubris’ employees and products into its Marlborough facility and made the location a headquarters for its ProCurve wireless group.
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